WASHINGTON — U.S. commercial banks reported record trading revenues in the first three months of 2009, helped by seasonal patterns and strong demand.

The Office of the Comptroller of the Currency said banks reported trading revenues of $9.8 billion the first quarter, a stark turnaround from the $9.2 billion loss reported in the final three months of 2008. The notional amount of derivatives held by insured U.S. banks also rose, increasing by $2 trillion during the quarter to $202 trillion.

"Banks continued to benefit from solid client demand and wide intermediation spreads in the first quarter, and from lower write-downs on legacy assets," said Kathryn Dick, deputy comptroller for credit and market risk.

Dick said seasonal variances helped account for some of the record revenues, and that increases in banks' own credit spreads boosted trading revenues because of declining values in bank trading liabilities.

Results are unlikely to be as good in the second quarter, she said, as banks face "strong headwinds."

"Some of the positive impact on bank trading results in the first quarter has reversed in the second quarter, due to improving perceptions of bank credit health," Dick said.

The OCC reported interest rate contracts increased $5 trillion to $169 trillion in the first quarter, and credit derivatives fell 8% to $15 trillion. Additionally, the net current credit exposure of banks fell $105 billion to $695 billion.

"Credit exposure from derivatives remains very high. However, concerns about counterparty credit risk have led to increased regulatory pressure to reduce bilateral credit risk by moving transactions with standardized terms on to regulated clearinghouses," Dick said.

The agency's report also found 96% of the notional amount of derivatives are held by the largest five U.S. banks, and that credit default swaps make up 98% of the total credit derivatives in the market.

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